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When an offensive spell is cast, the target has two separate chances to resist the attack.

First, there is a check based purely on the level difference between the caster and the target. This is referred to as the spell miss chance, and is affected by any Spell Hit Rating equipment that the caster is wearing. Talents that reduce the enemies' chances to resist spells, such as Arcane Focus, are also taken into account by this check.

If the target is of a significantly higher level, the spell will usually fail completely. If the target is significantly lower level, the spell will very rarely fail. This first check is why spell-casting players have such a hard time landing spells consistently on all monsters a few levels higher. In PvP combat, however, this is less of a factor; a level 10 Mage can land polymorph on a level 70 player with some regularity.

Note: Level-based resistance (not to be confused with level-based miss) can play a factor in total resists. For every level that a mob has over the player, there is 8 resist (believed; the exact number may be higher) added. For boss fights, this means there is 15-24 resistance added. This extra resistance means there will be partial resists on non-binary spells from the added resistance. However, this resistance has been shown to not apply to binary spells at all.

This level based resistance cannot be reduced by any means, not even Spell Penetration.

Average resistance may be no higher than 75%. Of course, what it takes to reach 75% average resistance depends on the spellcaster's level. One quirk here is that casters below level 20 are treated as if they were level 20 for purposes of calculating the resistance scaling here. So against a spellcaster of level 20 or below, it would take a resistance stat of 100 to get 75% resistance; level 30 would take 150 resistance; level 50 would take 250; level 60 would take 300; and level 63 would take 315.

Why is it called "average resistance"? For spells that have a non-damage effectsuch as slow, root, stunyou'll either take the hit or avoid the hit altogether; these are examples of binary spells. The average resistance is the chance you'll totally avoid the hit. Adding the word "average" is a little redundant in this case.

However, when spells do only damage, it's not just a full hit or full miss situation. Pure damage spells can be resisted for 0%, 25%, 50%, 75%, or 100% of their regular damage. Your average resistance can still be anywhere betweeen 0% and 75%. If your average resistance is maxed out, then there's a really good chance of having 75% of the spell's damage be resisted. There's also a fairly good chance of having 100% of the spell's damage be resisted, a slightly lower chance of 50% of its damage being resisted, a small chances of only 25%, or even 0% of the damage being resisted. It's a weighted average. Visualize it as a bell curve around your average resistance.

Unlike with armor, each extra point of magical resistance becomes more effective the more a character has. For example, going from 0 to 200 resistance halves the amount of damage a level 60 character takes, but to halve it again (to 25%) the character only needs 100 more resistance.

Similar to how melee damage reduction works, it is possible to calculate how much magical damage a character can take with a certain amount of health.

Damage absorbed / Actual damage taken

= 1 / (1 - damage reduction ) - 1

= 1 / (1 - (resistance / (5 * caster level)) * 0.75) - 1

This is the measure of how much damage a character can soak per point of health they have. Against a level 60 caster, a character with 200 resistance will resist 1000 damage for every 1000 damage they take, whereas with 240 resistance they will resist 1500 for every 1000 they take.

So for an example, if there are two mages in a fight against Ragnaros (boss level mobs are calculated as 3 levels higher then your current level), both with 3000 health, but one (Mage A) has just the 15 fire resist from mage armor, while the other (mage B) has 150 and is in a group with a paladin/shaman, so has an actual 210 resistance.

Mage A will resist, on average, 111 damage before his 3k HP are gone and he dies.

Mage B will resist, on average, 3000 damage before his 3k HP are gone and will likely have enough time to use a potion or something.